Andrew Romeo is a long-time veteren of the snus and associated industries. A New York native, Andy has worked throughout Europe and is currently building distribution networks in Russia.
Welcome once again to liberal hold-fast New York City, where you cannot smoke in the park, Central or otherwise (Coming Soon to an apartment building near you!), and soon, you will be deprived of your Big Gulps, Super-Sized High-Fructose-Corn-Syrup-laden Cokes/Pepsi's/Dr. Peppers/Mountain Dews/Sprites/7-Ups/Hires/Mr. Pibb, etc., if they are sold by food service or small convenience in servings over 16 ounces (Supermarket and grocery sales of higher volume packs are not affected, ostensibly, as they are used over an extended period of time in the home).
As Jon Stewart recently pointed out, , one can still order a mountainous heart-clogging pastrami and beef tongue sandwich from the Carnegie Deli followed by Hooters’ wings in New York (if you can find the Hooters), but XXL sugary drinks have got to go.
That is, if the companies are listening. And, when they are, how they use this close-contact data, and then, to what extent they rely on it as a reliable gauge of public opinion. This kind of data can be an amazing boon to a company looking to achieve true consumer feedback, and, simultaneously, it can be a crutch which eschews the expense of market research for the morass of what can amount to cheap Internet trolling.
Here are two extreme examples:
Parliament has been a popular cigarette in Russia since the late 1990s. Unlike in the US, it is super-premium, priced above Marlboro alongside brands like Davidoff and Sobranie.In 1998, during the financial crisis, we heard in informal talks with PM Russia, that while the majority of Russian smokers traded down to 'local' crap cigarettes to save money, Parliament sales remained steady, and the brand became a symbol of prosperity and wealth.Like many brands, it is available today in Russia in multiple SKU's of varying strengths and diameters. Many men in Russia/CIS smoke super-slims, for example, and almost all segments boast super-slim variants, with LD at the bottom, and Parliament at or near the top.
It is said that 2012 is going to be a year of big changes in the Russian tobacco industry. Rotating "DG-V" (EU-style) health warnings began last year, and most feel public places restrictions are imminent, as well as massive price hikes (a pack of Marlboro costs about US $2.50 today). WHO tar and nic ceilings (10/0.1) are already in place. Thus, all local factories have been shut or sold. Only the big boys remain after Donskoi Tabak went to Imperial last summer.
Having caught up with the news of Swedish Match’s legal initiatives vs. BAT, and especially the boys at V2, I thought a bit of perspective is in order. When I was promoted to head Gallaher Sweden AB in 2005, we were in the midst of being sued by Swedish Match for producing snus products which were almost identical, from a packaging point of view, to their market leading positions with General, Grovt, Ettan and Probe. The product inside had also been radically improved.
Swedish Match went after Gallaher Sweden because, at the time, Gallaher had redesigned Gustavus standard in a black can, while also launching Gustavus '1e Kvalitet' (same meaning in Swedish as 'Ettan') in a dark yellow can and Gustavus 'Grovt' and Gustavus 'whiskey' in brown and reddish brown cans, respectively. Gallaher had indeed overstepped the line in terms of copying the designs and names of SWMA's main product lines.
If I recall, the cost of a mini-snus factory should not run over $3 million. That’s with standard primary and Mertz machines, plus re-wetting, and, the variable, refrigerated facilities for storage. No white, unless you want to fake it, but then it looks like used Pampers.
I ran a snus factory in Vargarda Sweden for Gallaher (now JTI) for two years. The factory, formerly belonging to Gustavus AB, perfected its snus product under Gallaher, and launched a few interesting products, the most important being LD, which, for the first time, put a major global cigarette brand into the world of Other Tobacco Products (“OTP”).
The factory bled money until one brief moment when we had reached an annualized volume (read: best month ever, and multiply by 12) of 10m cans with LD at 7 SKUs in 2006.
Why? Labor: 52% of my cost. Materials: 37%. Tobacco and controllables: The rest.
Factories need volume to break even and pay wages, and, without cigarettes, snus start-ups are not viable.
Well-meaning mistakes have been made in the US: Liggett-Vector Group took the first plunge with two product lines (remember ‘Grand Prix?’), but they were imported and not true heat-pasteurized ‘Swedish’ snus products, despite their point of origin, SnusAB, in Sweden.
Liggett, internally, is dedicated to providing smokers with reduced-harm alternatives, and truly thought snus was one path to take. Yet, the consumers spoke, and, with an excise hike on smokes not having the hoped-for effect on smokeless sales, they eventually abandoned the project. Close to my heart, as I worked for the sister company ‘Liggett-Ducat’ (LD) and Gallaher/LD in Russia for years.
Nordic-American Smokeless, close to my heart, as I ran the Norwegian sister trading company “Taboca AS” for 1 ½ years, also tried. Co-investment with Swisher in a snus-y factory division in their Western Pennsylvania facility led to the launches of ‘Klondike’ and ‘Nordic Ice.’ “Snus-y?” Because the product is fermented. Just like the SnusAB product. Many consumers complained on-line of its cloying sweetness and dryness. Website is disabled.
American Smokeless (Discreet): Tom, your website is gone (all searches go to UST), yet your snus has been rated the best of the lot for fullness of flavor.
RJRUSA and PMUSA? If you are reading this, you know their products are generally reviled on a quality basis, especially for cloying sweetness and awful mouthfeel. Yet, unfortunately, they hold the greatest promise of eventually providing the product you want. Why? They make cigarettes. They have warehouses filled with snus-making equipment. RJR has access to BAT’s snus-making abilities (major shareholder), and PM to Swedish Match’s (partners in snus outside Scandinavia. 1847.).
Swedish Match: And this brings it down to the prime question-mark in the industry: The major piece of news that never, ever happened in 2009/10.
Albeit, SWMA is fighting many battles: The EU, for one, which in the Big Tobacco lunatic fringe, was closed to snus by Philip Morris International and/or Big Pharma in the 1990s. Yet, the two companies (minus Big Pharma) are now great buddies for smokeless around the world, and SWMA seems to keep throwing local business into PMI’s maw (South Africa smokes being one).
But, the USA is anemic. Since SWMA has re-organized for the 1700th time, and now has a “smoke-free” division with world-wide coverage, the US gets the “Original Pursuit” campaign, which is a mono-brand (General) tribute to NYC drunks out on St. Patrick’s Day, art galleries, and some kind of hang-gliding. And then, they announce the product’s availability has increased by 300 shops after 8 months. Not in NYC or LA, or Chicago, mind you, but the USA.
When I worked at Pepsi, 300 shops in a start-up was 5 guys working for a week. And the Swedish Match sales staff should know that.
In the US, the problem Swedish Match has had, in all its attempts at “educating” consumers these past two decades, is boring black and mustard-yellow cans, and ‘education’ campaigns at shops in major cities.
Go out there, and put your new products in 7000 shops. ALL the Shell stations, and ALL the Exxon stations. ALL the 7-11’s. You guys can get into 7-11…you’re all over them in Sweden and Norway. Invest money, knowing you will throw product away, but it’s better than the damned hang-gliding or art galleries. No-one cares about that.
In the US, ONLY Swedish Match will get this ball rolling. With its new innovative products and packaging, it can only succeed. Increase shelf life, and get out of the fridge business, except in tobacconists, but get out there! You’ve got a whole damned sales force, and cash, and the best, most cared for products in the business. Get your US snus factory open and kick some ass. Save some smokers’ lives in the process.
I am a liberal.
Don't like guns, but won't hug any trees. I eat animals, and distrust big corporations because I have worked for them. The FDA is over-worked, under-skilled and on the take. So is the Interior Department.
But the corporations I worked actually had their ducks in a row. Pepsi was always just a bit better than Coke, and Gallaher Group (now part of JTI) always has us attend crisis management meetings with our PR agency, Burston Marsteller, annually.
It's a good thing British Petroleum doesn't make snus or soft drinks for all our sakes.
This is a huge topic for public companies because it is designed to, when properly executed (WITH the help of the PR agency), mitigate any losses to shareholder value by assuring them that the company is in full control.
In consumer goods we cover (in no real order)
I’m sick. Sick and tired of those volcano-cloud apologists who won’t let us get on our damned planes and do the shit we’re meant to be doing.
I mean, why can’t I get on the damned plane? The sky is blue, for Christ’s sake! The Germans have flown ten flights, the Dutch have flown ten flights, and the Russians aren’t even paying attention. Maybe they have super-planes. Why don’t we have super-planes?
I think the whole EU has gone Icelandist. I mean, why does everyone believe them? If the volcano is costing the airline industry $200m per day, why isn’t there a NATO force attacking the volcano? Filling it up with jello or something?
Iceland has the population of Binghamton, NY. Easy-peasy population re-lo and bomb the place away, filling the volcano with some kind of resin-y goo which will give us all a break, and maybe excite an engineer somewhere to produce an engine that doesn’t die from volcano ash, i.e. the Russian super-plane.
I mean, President Medvedev flew to Krakow for Kachynski’s funeral in his Russian (super-plane) IL-96 (irony!), while everyone else in their Boeings and Airbuses and armored cars (Angela Merkel) stayed put.
All because of the damned cloud. Iceland’s a nice place. It’s the Icelandists I can’t stand.
Surviving on vodka and peanuts,
Having moved from the mother’s love of an international ‘big tobacco’ job at Gallaher, to the aggressive, tactical point-and-shoot “small-fish” job as a small snus company director in Scandinavia (Taboca AS), I now find myself in Russia. Again.
Russia, for me, is where my career started. I studied the language in the 1980s at school and at Georgetown University, traveling to the then USSR first as a wide-eyed teenage tourist in 1982, and then as full-fledged student of Russian for a semester in 1985.
"What is to be Done?" is the title of at least two pre-Communist treatises, one written by Nikolai Chernyshevksy in 1861 (while in prison in St. Petersburg), which called on the working classes of Russia to unite under a vanguard party, and another, written by Vladimir Lenin, which claimed that this would lead to worker-led 'trade-unionism' and not allow the intellectuals to create a Workers' Revolution based on intellectual scientific principals.
It's nice to know even the Communists hated trade unions.
In the early 1990s, the US led Poland through economic 'shock therapy,' which allowed individuals to buy shares of the state-owned companies that employed them. It worked, and Poland transitioned quickly with many bumps into a dynamic capitalist society. It helped that they had been capitalist and democratic before WWII and the subsequent occupation by the USSR until 1989.
Starting next week, I will be posting from my old 'stomping ground' of Russia.
Specifically, I have accepted a consultancy appointment with a drinks company in St. Petersburg, and will be primarily focused on business in the "regions."
In Russia, the "regions" is everything outside of Moscow and St. Petersburg. I will be spending time in the Ural Mountains (Yekaterinburg, Tyumen, Chelyabinsk, Ufa), the Far East (Vladivostok, Khabarovsk), Siberia (Novosibirsk, Krasnoyarsk, Irkutsk), the Volga region (Samara, Volgograd, Saratov, Nizhniy Novgorod) and the South (Rostov, Sochi, Krasnodar).
I have spent time in all these cities, and because packaged drinks occupy the same retail shops as tobacco products, I will be able have a look first hand at how that business is doing. At last glance, Russia had a 360 billion stick cigarette market. Once, the Big Boys competed with over 60 local factories, of which perhaps a dozen still exist today. JTI leads the market after its acquisition of Gallaher in 2007, followed by Philip Morris, BAT and Imperial.
The last great local fighter, "Donskoitabak" missed out on all the fun in the 1990s (BAT bought 'Yava,' Liggett bought "Ducat," (and Gallaher then bought "Liggett-Ducat," the reason for the brand-name 'LD' I kid you not). JTI bought the largest factory in St. Petersburg, and PMI built from scratch. Donskoi continues to work on reduced local share in Rostov and the South, and a few factories still churn out non-filtered traditional products.
Snus is available in outlets all over Moscow, St. Pete's and the western half of the country, and I will do my best to send in reports from time to time as to what is going on in this turbulent industry. What I know now is that, after a mass consolidation of hundreds of local wholesaler/distributors in the early 2000's to three, the Great Recession has given rise to an unraveling of this secure environment. Small distributors are popping up again, and the cash-driven open markets or "bazaars" which were so prevalent in the 1990s have begun re-appearing.
Russia lives in "interesting times" and I am happy to be going back.
Желаем всем вам мои наилучшие пожелания,
ANDREW ROMEOSoon Reporting from Russia for SnusCENTRAL.org
In discussions on-line about the impending PACT act becoming law, it has become obvious that American snusers feel they are getting a raw deal.
In a sense, American consumers of Swedish snus have been basking in a "duty-free" zone for the past few years, many weening themselves from cigarettes in the process. Your lungs, God and the Greater Good think this is wonderful. The US Government does not. Tobacco is taxed. Period.
Swedish snus consumers in the USA will eventually be forced to pay taxes on their snus purchases. They will most likely see in the next few years an increase in availability in US 'bricks & mortar' shops, and a drastically reduced portfolio. No more Gotlands Julesnus or Offroad Limited Edition 'Spam with Egg, Bacon, Sausage and Spam' Flavor, for sure. But that's another article.
Many have poo-pooed an underlying reason for the passage of this legislation: smuggling as a source of funds for terrorist groups. Many have laughed that this is as ludicrous as the 'for the children' banter which has led to a lot of pain for legitimate adult tobacco consumers now unable to procure their favorite flavored smokes.
Swedish Match AB is in PR Emergency Mode today, Monday, October 26th. Why?
An American researcher from Harvard, Greg Connolly, read a snus ingredient label in 2008, and found a smoking gun called "E500" which regulates acidity in food products, and has been in traditional use in snus for many decades. It is all snus products produced in Sweden.
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